Correlation Between Allied Bank and Hi Tech
Can any of the company-specific risk be diversified away by investing in both Allied Bank and Hi Tech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Allied Bank and Hi Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Bank and Hi Tech Lubricants, you can compare the effects of market volatilities on Allied Bank and Hi Tech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Allied Bank with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Bank and Hi Tech.
Diversification Opportunities for Allied Bank and Hi Tech
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Allied and HTL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Allied Bank and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and Allied Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Allied Bank are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of Allied Bank i.e., Allied Bank and Hi Tech go up and down completely randomly.
Pair Corralation between Allied Bank and Hi Tech
Assuming the 90 days trading horizon Allied Bank is expected to generate 1.66 times less return on investment than Hi Tech. But when comparing it to its historical volatility, Allied Bank is 1.83 times less risky than Hi Tech. It trades about 0.19 of its potential returns per unit of risk. Hi Tech Lubricants is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,501 in Hi Tech Lubricants on August 28, 2024 and sell it today you would earn a total of 732.00 from holding Hi Tech Lubricants or generate 20.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Bank vs. Hi Tech Lubricants
Performance |
| Timeline |
| Allied Bank |
| Hi Tech Lubricants |
Allied Bank and Hi Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Bank and Hi Tech
The main advantage of trading using opposite Allied Bank and Hi Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Bank position performs unexpectedly, Hi Tech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hi Tech will offset losses from the drop in Hi Tech's long position.| Allied Bank vs. National Bank of | Allied Bank vs. Meezan Bank | Allied Bank vs. Bank Al Habib | Allied Bank vs. Habib Metropolitan Bank |
| Hi Tech vs. Al Ghazi Tractors | Hi Tech vs. Shell Pakistan | Hi Tech vs. Nestle Pakistan | Hi Tech vs. Hinopak Motors |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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